What is market efficiency?
market efficiency is a term used to describe the degree that shares prices represent all the data associated with the market. This means that market efficiency is usually identified in degrees, with strong market efficiency, indicating that prices are firmly and accurate reflections of what is happening on the market. On the other hand, if the stock price does not seem to be associated with the very strongly prevailing market conditions, this is expressed as weak market efficiency.
It is important to realize that market efficiency does not necessarily mean that market conditions are the only factors in considering the status of the investment opportunity. The level of efficiency by example of the relationship between current market events and the price of investment deserves assessment along with other factors if the investor is thinking about buying or selling this asset. In the way weig is some controversy of decision -making should be given to HT market efficiency.
One concept that is related to market efficiency is known as an effective hypothesis on the market or EMH. Proponents of this approach indicate that it is impossible for the asset to overcome the market where traded, simply because all relevant factors are already taken into account in the price of the stock. The detectors of this theory sometimes question whether all these factors are actually taken into account in determining the price of the shares, as the price may or may not adapt to the factors that investors can consider significant. Although they allow stock prices to be usually determined on the basis of information that is easily available, this information may or may not be interpreted correctly or may affect investors that have been overlooked or discounted by the markets themselves.
Since the IS market efficiency focused on the relationship of assets on a given market, it is possible for the asset to have strong market efficiency on one market and will be somewhat weaker in the other market. This is because the perception of relevant inferOrgrants may vary somewhat, and how these specific pieces of information relate to the formulation of the market reaction. For this reason, there is no real way to say that the asset has specific market efficiency, which is applicable at all times and in all places. Investors then have to look carefully at what data each market is considering and determine for themselves, if these data are complete and relevant, or if they believe that more information or different interpretations of these data are needed to properly evaluate the potential of this investment.